AT&T Inc.
(
T
) put a cap on its unlimited data plans due to growing demand and
limited capacity. AT&T said that the data speeds on unlimited
3G and 4G smartphones would slowdown when it exceeds more than 3
gigabytes (
GB
). The 4G LTE speeds will also lessen beyond 5GB in a particular
month.
The move comes on the back of customers' complaints last month
about the speed slowdown after using only 1-2 GB. Previously, the
company had put a limit on the speeds for those smartphone
customers, who already use the top 5% data in a particular month in
a congested network area.
The demand for smartphones is growing in leaps and bounds,
leading to greater requirement for wireless data services. Data
usage has more than doubled over the last three years. As a result,
the mobile operators, including AT&T,
Verizon Communication Inc
. (
VZ
) and
Sprint Nextel Corp.
(
S
), have already switched to tiered-data pricing plans from the
unlimited data plans in June last year. However, the old and
existing subscribers are still using the unlimited plans.
The second-largest U.S. mobile service provider is facing
hurdles in managing the rising mobile data traffic resulting from
the most popular
Apple Inc.
's (
AAPL
) iPhone and
Google Inc.
's (
GOOG
) Andriod smartphones amid stiff competitive pressures and
limited wireless spectrum licenses.
With the unsuccessful ending to the T-Mobile merger, the company
is in need of additional airwaves to expand its high-speed
services. Already criticized for dropped calls and poor network
coverage, AT&T will face more constraints in its capacity
deployment than its largest rival, Verizon, which will in turn hurt
subscriber growth.
AT&T is competing with the aggressive pricing plans of
Verizon and Sprint. Moreover, smaller wireless carriers, such as
Deutsche Telekom's T-Mobile,
MetroPCS
Communication
(
PCS
) and
Leap Wireless
(
LEAP
) are also offering cost effective unlimited voice and data plans.
This may negatively influence AT&T's high-end handset sales and
challenge subscriber retention.
We prefer to maintain our long-term Neutral recommendation on
AT&T. The company retains the Zacks # 3 (Hold) Rank for the
short term (1-3 months).
APPLE INC (
AAPL
): Free Stock Analysis Report
GOOGLE INC-CL A (
GOOG
): Free Stock Analysis Report
LEAP WIRELESS (
LEAP
): Free Stock Analysis Report
METROPCS COMMUN (
PCS
): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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